Hershey, Ferrero in talks over Cadbury - source

By Jessica Hall and Jo Winterbottom

PHILADELPHIA/MILAN (Reuters) - Chocolate makers Hershey Co and Ferrero SpA are considering a joint bid for Cadbury Plc that could help the British confectioner fend off a hostile takeover by Kraft Foods Inc.

A source familiar with the talks between U.S.-based Hershey and Italy's Ferrero said on Tuesday the discussions between the two sides were "very preliminary. Very early in the process."

The talks are the strongest sign yet of a possible rival bid to Kraft's $16.7 billion offer, which Cadbury rejected and said was "derisory".

The Wall Street Journal said Hershey may weigh a bid with Ferrero or on its own. Hershey has been in talks with JPMorgan Chase & Co and Bank of America Corp to line up financing for a potential bid for Cadbury, the newspaper reported on its online edition.

The newspaper said easing credit markets have emboldened Hershey that it could arrange the funding for a possible bid to counter Kraft's offer.

Ferrero and Cadbury both declined comment. Hershey and Hershey Trust officials could not immediately be reached.

Cadbury has not been contacted by Ferrero but would consider any attractive offer, a second source familiar with the situation told Reuters.

"Cadbury has heard nothing from Ferrero or people acting for it. Cadbury is not up for sale, but the company would give proper consideration to any offer that valued it properly and would be of interest to shareholders," the person said.